Morning Coffee: The $645k salary and the silliest expense claim ever. Richest people in the room fear tax squeeze

The funny thing about expenses claims is that they can be too small as well as too big. Massive unauthorised blowouts at pricey restaurants are always going to raise eyebrows and may get rejected, but if you make lots of small claims for trivial items, you'll also get yourself noticed. Myriad small claims create the impression that you’re entirely in it for yourself - to the extent that you're not willing to spend any of your own money. And even if they’re entirely legitimate business expenses, it’s not a good look for someone earning a very comfortable six figures to be claiming every possible penny.

This leads us to François Ortalo-Magné, the Dean of London Business School. Ortalo-Magné is currently in receipt of a basic compensation package totaling £501k ($645k) and he doesn’t seem to have heard of the old proverb that the true test of an expenses claim is whether you’d be happy to see it printed above your photograph in a newspaper (in this case the Sunday Times). Although the reporters raise questions about Ortalo-Magné's spending on luxury hotel suites, spousal accompaniment on international flights and other costly things, the claim that they’ve chosen for the headline is the £1 ($1.25) for a bag of supermarket potato chips, plus small bottles of hand sanitizer, a bag of chocolate almonds and a “222 detox” drink.

What kind of person claims for this sort of thing when they’re earning more than enough to pay for it themselves? Well, long experience of investment bankers suggests there's the sort who's pathologically penny-pinching, and can’t abide the thought of paying for something if they don’t have to, however small. Even though the implied compensation for the time spent itemizing the receipt for a Starbucks coffee is well below minimum wage, they are compelled to do this. - Letting the expense go would cause them real psychological pain.

Then there's the more normal kind of person who has given absolutely no thought to their expenses. This is the person who has just gone through a business trip taking receipts as they are given and shoving them into a jacket pocket or into one of the zips on their carry-on bag. When they get back to the office, they just clear out the pocket and hand the desk assistant a sheaf of slightly crumpled receipts, with a sheepish grin and a mumbled “could you sort these out for me, please?”

The trouble is that both of these approaches – miserly or careless – tend to generate expenses claims which, for very small financial benefit, have the potential to make you look silly. If you’re a university dean whose expenses are subject to freedom of information requests, you’re offering low hanging fruit to any reporter who needs to fill a page. If you’re a mere banker, you just run the risk of becoming the object of unflattering gossip around the floor, when the desk assistant gets frustrated at having to file another dozen claims for a few dollars each. If you’re meant to be cultivating a profile as a leader, looking silly like this is something you really can’t afford. Better to put a little bit of common sense into the expenses claim and let some of the small stuff go by.

Separately, instead of worrying about your expenses, you could spend the time worrying about your tax bill or about house prices. In London at the moment, the two great angst sources are related to one another, as people have begun to worry that if a left-wing government comes to power in the near future, bankers and CEOs will be targeted and have to sell up and leave the country.

“The person that everybody thinks is absolutely loaded and makes £300k a year will be so squeezed that I think they’re going to have to leave, or contemplate doing something else or downsizing, all of which is going to have a material impact on property prices," one senior investment banker informed the Times.

This sort of story always appears in the press at about this point in the political cycle, and the historic evidence is that a lot more people talk about leaving the country in the event of a government they don’t like than ever do it. But in this case, with Brexit already destabilising things for many UK higher rate taxpayers, and soak-the-rich rhetoric from the Labour Party dialed up to levels not seen for a generation, it might need to be taken more seriously. As well as the CEO-level and private jet crowd, real estate agents are reporting that even mid-level bankers are having to think hard about whether the cost of Central London living would be sustainable in a significantly tougher tax environment.

Meanwhile ...

After last year’s performance squeeze and considerable fund outflows, the asset management industry is under pressure to cut costs to match revenues, and seems to be choosing to do this by moving on headcount rather than pay. Layoffs have already been announced by some of the biggest players, and it looks like more are on the way. (FT)

Some bad news on the sell side too; SocGen is planning “urgent” cost cuts in the investment bank after a poor trading performance in Q4 (Bloomberg)

A former Credit Suisse analyst and two casino CEOs teamed up to build an organic winery in New Zealand. An illustration of the extent to which it didn’t go well might be the fact that one of the disputed points in the ensuing litigation was if one of the partners was joking when he threatened to bury the general manager out in the desert (Bloomberg)

A thorough Longread on the battle for Barclays investment banking between Jes Staley and Edward Bramson. Much depends on what the new chairman (Nigel Higgins, formerly of Rothschild) thinks, which is as yet unknown (FT)

More of the inside story of the Orcel/Santander job move is coming out. Apparently Andrea Orcel had even asked Santander for prorata compensation for his 2018 bonus! By the end, it seems there was no price at which Santander was prepared to do the deal. (Financial News)

The Swiss country manager of EY has departed, after criticism of his handling of a harassment scandal involving one of the partners (Finews)

Deutsche’s head of investment banking Garth Ritchie received – but did not necessarily read – an email warning about the cum-ex scandal back in 2007 (FT)

The amount of cocaine in the River Thames is so great that it’s overwhelming the systems meant to filter it out, and making eels hyperactive (The Times)

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